Health Matters: How to minimize the financial effects of health care costs

Qing Yang and Kevin Parker
Special to The State Journal-Register
Qing Yang and Kevin Parker

Two years ago, Qing’s uncle suffered a stroke that paralyzed the left side of his body. He was brought to the hospital by ambulance, received clot-busting medicine, and spent several weeks in the intensive care unit. Then after months of rehab, he finally regained the use of his arm and leg. His family felt relieved that he recovered without any long-lasting disability; however, the process left them with a stack of medical bills that they’re still paying off to this day.

While we can’t predict when something like a stroke is going to happen, we can plan and prepare for both routine and unexpected medical expenses so they don’t completely derail our finances.

Know your insurance

Previously we’ve talked about evaluating medical insurance and choosing among the different plans. We want to reiterate the importance of understanding your insurance, including which providers and facilities are in and out of network, what services are covered fully, partially, or not at all, and how much of the cost of care you are responsible for. Insurance companies are required to provide a Summary of Benefits and Coverage in plain language, which you can access from the online member portal, through the human resources office (if you have employer-sponsored plans), or by calling the number on your insurance card. When you see a new provider or schedule a procedure, call your insurance beforehand to obtain a cost estimate and check if extra steps (e.g. pre-authorization) are needed to ensure coverage. Knowing your insurance will eliminate surprises and keep much of the care process in your control.  

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Have a budget

Routine health care expenses include insurance premiums, deductibles, co-pays and co-insurances. You can anticipate these amounts based on the number of providers you see, and how many prescriptions you take. If your overall health has been stable, use how much you spent last year as a guide.

In addition, build an emergency fund in case you’re struck with a sudden illness or accident. The goal amount should be a year of your family’s out-of-pocket maximum. Save a little each month into a dedicated account and don’t touch the money except for health care needs. 

Take advantage of savings vehicles 

If you have a high deductible health insurance plan, you’re eligible for a health savings account. The contributions are tax-deductible and the investment grows tax-free, as long as withdrawals are for health care expenses in the future; any unused balance rolls over from year to year. Some employers match contributions to HSAs, so take advantage of this if offered.

Another common vehicle is a healthcare flexible spending account (FSA), which is set up as “use it or lose it.” The fund is allocated from your pre-tax earnings, but you must spend it by the end of the year. Things eligible for health FSAs include not only the usual out-of-pocket fees, but also eyeglasses, hearing aids, over-the-counter medications, and a variety of pharmacy purchases.

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Critical illness and hospitalization insurances

Employers may offer these plans or you can purchase them separately or as a part of a life insurance package. They pay a lump sum in the event you’re diagnosed with a serious condition, including cancer, stroke and heart attack, or if you’re hospitalized for any reason. Most employer-sponsored plans are guaranteed-issue, whereas individual plans likely require a medical exam and underwriting. Some exclude pre-existing conditions; for instance, if you have known coronary artery disease, you won’t be paid for a heart attack. While these plans can provide a cushion against unexpected catastrophes, their utility depends on your likelihood of suffering such an event, which you can estimate with online calculators by inputting your age, gender, life habits and chronic diseases.  

Keep track of your spending

Keep all your medical bills and health-related receipts for several reasons: (1) You need to submit them for reimbursement from HSA or FSA; (2) Medical expenses exceeding 7.5% of your adjusted gross income are tax-exempt and you need to list them on itemized deductions; and (3) Having a clear idea of your expenses helps you budget better in the future, reducing the amount of stress in your life, thereby increasing your physical, mental, emotional and financial health!

Qing Yang and Kevin Parker are a married couple and live in Springfield. Dr. Yang received her medical degree from Yale University School of Medicine and completed residency training at Massachusetts General Hospital. She is an anesthesiologist at HSHS Medical Group. Parker has helped formulate and administer public policy at various city and state governments around the country. He is formerly the group chief information officer for education with the Illinois Department of Innovation and Technology. This column is not intended to substitute for professional medical advice, diagnosis or treatment. The opinions are those of the writers and do not represent the views of their employers.